Assessee is  engaged in business of manufacturing of ENA (Extra Neutral Alcohol) and Rectified Spirit .It gave an affidavit to Excise department that excise verification issued by Excise Authority of importing State would be submitted within 90 days of exporting ENA from its distillery . Assessee failed to comply with said condition, it had to make certain payment to State Excise Authority in response to demand notice issued by District Excise Officer. AO  held that said payment was of penal nature, disallowed same by invoking Explanation 1 to S. 37(1) of the Act . Tribunal  and allowed the claim . High Court up held the order of the Tribunal.